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2020 (3) TMI 1135 - AT - Income TaxDeduction u/s 80P(2) - assessee was doing the business of banking and therefore in view of insertion of section 80P(4) with effect from 01.04.2007 the assessee will not be entitled to the deduction u/s 80P(2) - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT - CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT 2019 (3) TMI 1580 - KERALA HIGH COURT The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited 2016 (7) TMI 1405 - ITAT COCHIN had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee and therefore the said interest income was eligible to be assessed as income from business instead of income from other sources . However as regards the grant of deduction u/s 80P of the I.T.Act on such interest income the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly
Issues:
1. Disallowance of deduction u/s 80P of the I.T. Act by the Assessing Officer. 2. Appeal to the CIT(A) and subsequent rectification order u/s 154 of the I.T. Act. 3. Interpretation of the judgment of the Hon'ble jurisdictional High Court regarding deduction u/s 80P of the I.T. Act. 4. Treatment of interest income received from investments with Co-operative Banks and other Banks. 5. Grant of deduction u/s 80P of the I.T. Act on interest income. Analysis: 1. The Assessing Officer disallowed the claim of deduction u/s 80P of the I.T. Act for the co-operative society, stating that it was engaged in banking activities, making it ineligible for the deduction. This decision was based on the insertion of section 80P(4) of the I.T. Act. The Assessing Officer also disallowed the deduction on interest income from investments made with District Co-operative Banks and other Banks. 2. The CIT(A) allowed the appeal by granting the deduction u/s 80P of the I.T. Act, including interest income received from other banks and treasury. The CIT(A) relied on a judgment of the Hon'ble jurisdictional High Court to support this decision. 3. Subsequently, the CIT(A) issued a notice u/s 154 of the I.T. Act to rectify the order based on a different judgment of the Full Bench of the Hon'ble jurisdictional High Court. The CIT(A) then passed an order disallowing the deduction u/s 80P of the I.T. Act, which led to the appeal before the Tribunal. 4. The Tribunal considered the conflicting judgments of the Hon'ble High Court regarding the eligibility of the co-operative society for deduction u/s 80P of the I.T. Act. The Tribunal held that the Assessing Officer should examine the activities of the society to determine eligibility for the deduction. 5. Regarding interest income from investments with Co-operative Banks and other Banks, the Tribunal directed the Assessing Officer to assess the activities of the society before granting deduction u/s 80P of the I.T. Act on such interest income. In conclusion, the Tribunal allowed the appeal for statistical purposes and dismissed the Stay Petition. The decision emphasized the need for a detailed examination of the activities of the co-operative society to determine its eligibility for deductions under the I.T. Act, in line with the judgments of the Hon'ble High Court.
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